Consumer Law & Policy Blog

Articles on the CFPB

by Jeff Sovern

Mark W. Olson, former Federal Reserve Board governor, and former chairman of the American Bankers Association predicts here a compromise on appointment of a CFPB director.  He writes:

Expect a compromise that will please very few. It is hard to believe that many members of Congress running for reelection will support the repeal of a regulatory entity designed to "protect consumers."

On the other hand, that sort of a concentration of authority is unlikely to stand over multiple changes in administrations. Look for the single "director" to be replaced at some point by a board, which would require its re-designation from an executive agency to a commission.

Meanwhile, Alan Charles Raul attacks the independence of the Bureau while Clyde Mitchell, formerly a partner at White and Case, and an adjunct professor at Fordham has a piece in the New York Law Journal (behind a paywall) agreeing with Republicans that the Bureau should be run by a commission instead of a director (he doesn't refer to the problems with the House bill providing for a commission) but arguing that the Bureau's funding should be left as is, contrary to Republican demands.

None of these writers explains why it is ok for the Office of the Comptroller of the Currency to have an independent director rather than a commission, not be subject to the congressional appropriation process, and (unlike the CFPB), not be subject to overruling by the Financial Stability Oversight Council.

Lisa Tripp's Empirical Study of Arbitration Clauses in Nursing Home Contracts

Lisa Tripp of John Marshall has written An Empirical Study of Pre-Dispute Binding Arbitration Agreements in Nursing Home Admission Contracts. Here's the abstract:

The use of pre-dispute binding arbitration agreements has been commonplace in variety of commercial contexts, such as brokerage agreements, insurance contracts and credit card contracts for many years. Health care had historically been one of the fields that had not embraced pre-dispute binding arbitration agreements. The reluctance to use pre-dispute binding arbitration agreements appears to be changing in at least one sector of the health care field. An examination of admission contracts used by North Carolina nursing homes and telephone survey of North Carolina nursing homes revealed that 43 percent of nursing homes now incorporate pre-dispute binding arbitration provisions into their admission contracts. All of the major nursing home chains operating in North Carolina use pre-dispute binding arbitration agreements in at least some of their facilities, while smaller operators use them sporadically.

The terms of these agreements vary considerably. The large chains tend to incorporate some of the provisions in the model arbitration agreement drafted by the American Health Care Association (AHCA), the nursing home industry trade organization. AHCA’s model language includes a 30-day rescission period and language that acceptance of the arbitration provision is not a precondition to admission. Some of the large chain facilities also include a provision that the arbitration will be conducted at the facility if the parties can’t agree on another location. Some of the smaller operators include provisions that limit damages and discovery, prohibit punitive damages, and expressly condition entry to the facility on signing the pre-dispute arbitration agreement.

The implications of the rising use of pre-dispute binding arbitration clauses may be significant. There are many counties in North Carolina where 50-100 percent of all of the nursing home operators use these agreements. With so many operators selecting pre-dispute binding arbitration, this may have the effect of forcing some vulnerable elders out of the public court system with all of its safeguards, and into private arbitration without those protections.

Although some of these agreements contain language stating that the agreement is voluntary or may rescinded, this language, by itself, provides no guaranteed protection that facilities are enforcing the contracts as written. This study found incidents where nursing homes were requiring new residents to sign pre-dispute binding arbitration agreements as a condition of admission, even though the language in those facilities’ agreements stated that signing the agreement was voluntary. This study also found evidence of a significant amount of confusion among staff of nursing homes using these agreements about whether their facilities were using them at all and what arbitration agreements really meant.

 

 

Fuel Economy Standards to Go to 55 Miles Per Gallon By 2025

Amidst the debate over the debt ceiling and the market crash, you may have heard that the Obama Administration struck a deal with the major auto manufacturers to take average vehicle fuel economy standards to 55 miles per gallon by 2025. That's about double where we are today. You can read all about it at this webpage. (Fuel economy standards in the the EU and Japan now are nearly where the U.S. will be in 2025.)

Rob Blackwell Predicts that the CFPB Will be Leaderless for Years

Here (behind the American Banker's paywall, unfortunately).  He thinks a compromise between the administration and the Republicans is unlikely; a recess appointment would mean a lengthy court battle during which the Bureau would operate under a cloud; and that the administration might prefer to be able to paint the Republicans as anti-consumer obstructionists in 2012.  It's a depressing but worthwhile read.

Causes of the Bad Economy

Read this piece by Steven Pearlstein in the Washington Post. He begins by explaining why the economy is not recovering:

Because we never really fixed underlying structural problems in the U.S. and global economies that had been building for decades and caused the financial and economic crisis in 2008.Those problems included a U.S. economy that was living well beyond its means, consuming more than it produced. They included an Asian economic boom that relied on intentionally undervalued currencies that led to massive buildup of dollar reserves and a massive credit bubble in the United States. And they included a new European system with a single currency and a single monetary policy but not the single economy that is needed to go along with it.

Here's one idea to spur recovery:

Over the next decade, the federal government is slated to spend hundreds of billions of dollars building roads, schools, airports, trolley lines and airport terminals, modernizing the air traffic control system, replacing computer systems and buying planes, ships, tanks, trucks and cars. Moving up some of that spending from years 8, 9 and 10 to years 1,2 and 3 won’t cost any more in the long run, or increase the long-term deficit any more, but could sure help put a floor under the economy in the short run.

So, what's the chance that will happen given what we've just seen in Congress?

 

Ballard Spahr Blog on CFPB: CFPB Monitor

by Jeff Sovern

I have been remiss in not drawing readers' attention to the very interesting and informative Ballard Spahr blog on the Consumer Financial Protection Bureau CFPB Monitor,  which started up last month.  Among the posts that especially caught my eye: Alan Kaplinsky's observation that Comptroller of the Currency-nominee Thomas Curry's Senate testimony  "gave the impression that he is a strong advocate of the national bank charter and that he is unlikely to make any changes regarding preemption," and his post about whether the Bureau will bar the use of arbitration clauses in consumer financial contracts.  CFPB Monitor looks like a valuable addition to consumer law blogs.



Elizabeth Warren Says Goodbye to the CFPB Staff

The American Banker publishes Elizabeth Warren's goodbye email to the CFPB staff.

Banks Emboldened by Concepcion

The Wall Street Journal reports that small and regional banks, encouraged by Concepcion, are increasingly adopting arbitration clauses.

WaPo Portrait of Cordray

Here.  The Times had earlier assessed Cordray: "Mr. Cordray has the credentials and skills for the job."